This bill represents the first implementation phase in the Government’s comprehensive reform of the Child Support Scheme. This reform flows from the extensive work of the Ministerial Taskforce on Child Support and the Government’s response in February this year to the Taskforce’s recommendations.

The Child Support Scheme was introduced in 1988 to deal with the consequences on children of marriage and relationship breakdown, including the relatively low living standards of many children, the large numbers of separated parents dependent on welfare, and the low amounts being paid in child support by non-resident parents.

The House of Representatives Standing Committee on Family and Community Affairs responded to ongoing community concern about child custody arrangements with a wide-ranging inquiry and report, Every Picture Tells a Story, which was released in late 2003. The Ministerial Taskforce on Child Support was then established to look further into the complex detail involved, leading to its report, In the Best Interests of Children, being presented to the Government in mid-2005.

The Taskforce suggested the present Child Support Scheme does not reflect community standards on shared parenting and the increased participation of women in the workforce. It also reported that the Scheme does not accurately reflect the relationship between income and spending on children in ordinary families, nor is it well integrated with the income support, family payments and family law systems.

The package of reforms announced by the Government in response to the Taskforce findings will constitute a major overhaul of the Scheme. Notably, it will include a new child support formula that reflects the true costs of raising children in Australia, recognising the incomes of both parents and balancing the needs of first and second families. The changes will affect 1.4 million parents and 1.1 million children. The aim is to reduce conflict between separated parents, particularly through encouraging shared parenting as part of a system that is fairer and puts the needs of children first.

The reform package announced by the Government will be introduced in three stages, with the more extensive and complex elements, including the new formula, being the third stage. This bill introduces the first legislative stage of the package of reforms, to be implemented in July 2006.

Among these initial measures is an increase in the minimum child support payment from the current amount (equal to $5 per week) to the amount that would have been in place if the old minimum had been indexed since its introduction in 1999. Furthermore, this new minimum payment (currently equal to about $6.15 per week) will retain its value through a regular indexation process.

A further measure will lower the cap on income that is taken into account in working out child support liabilities. At present, income in excess of two and a half times the yearly value of average weekly total earnings for full-time adults is disregarded. The changed cap will have regard to a comparable amount drawn from the average weekly total earnings for all employees—a lower reference amount. This will mean that some high income earners will pay child support at a lower rate than under the current cap, which has required some payers to pay more than the actual costs of their children.

The bill will also provide more detail on the circumstances in which a parent’s capacity to earn may allow the Child Support Agency or a court to depart from the usual administrative assessment rules in setting the amount of child support payable. A decision under the capacity to earn rules is one where the parent’s real income is not disputed, but it is considered that he or she has a capacity to earn at a greater level than is being exercised. A decision may be made in these circumstances to assess the child support liability as being at a higher rate. Greater clarity and accountability is to be brought to capacity to earn decisions.

For example, before such a decision may be made, it would have to be clear to the Child Support Agency or a court that the parent either is unwilling to take up clear work opportunities, has reduced his or her employment to a level that is lower than the normal full-time level in the occupation or industry in question, or has otherwise changed his or her occupation, industry or working pattern. Also, it would have to be considered that these employment decisions are not justified because of the parent’s health or caring responsibilities. Lastly, the decision could only be made if the parent had not demonstrated that a major purpose of the parent’s employment decisions was not to affect the child support assessment.

The bill increases from 25 per cent to 30 per cent the proportion of a payer’s child support liability for a particular child support payment period that may be met through what are known as prescribed non-agency payments. These are payments made by the payer to certain third parties in partial satisfaction of his or her child support liability. Payments such as child care costs, school fees and essential medical and dental bills, amongst other things, are allowed for this purpose. The increased level will give payers extra flexibility in meeting their obligations. Any remaining amount of a payment that exceeds the 30 per cent limit will continue to be credited against the payer’s liability in subsequent child support payment periods.

Lastly, the bill addresses a constitutional issue with the application of the Child Support Scheme to exnuptial children in Western Australia.

Constitutionally, the Child Support Scheme extends to children of marriage in all states but to exnuptial children only to the extent that the states either refer their powers to the Commonwealth or adopt Commonwealth laws. All states have referred to the Commonwealth their power to make laws in relation to exnuptial children except for Western Australia, which has chosen instead to adopt the child support legislation from time to time. However, the Western Australian adoption Acts have tended to lag behind the Commonwealth amendments.

In the periods between Commonwealth amendments and Western Australian adoption, two parallel child support schemes have operated—a pre-amendment scheme applying to exnuptial children in Western Australia and a post-amendment scheme applying the up-to-date legislation to all other children in Australia, including children of marriage in Western Australia.

The amendments in the bill confirm the legal status of this arrangement, to provide certainty to families and children affected.